CIVIL SOCIETY ORGANIZATIONS DECRY "FALSE PROMISES" OF DOF FOR TRANSPARENCY IN THE EXTRACTIVES SECTOR
Groups to press for government monitoring of mining companies

Leaders of mining affected communities and civil society groups decried Friday a government official’s statement that the Philippines can ensure transparency in the extractives sector following the country’s withdrawal from the Extractive Industries Transparency Initiative (EITI), a platform for monitoring mining companies’ performance.

In a meeting to discuss strategies to press for transparency and accountability in the extractives sector the civil society organization (CSO) leaders said the government should halt its “subservience to corporate interests in the mining industry.”

Finance Secretary Carlos Dominguez had earlier downplayed the withdrawal saying that the Philippine government  will “continue to champion better resource and revenue management” in place of the global multi-stakeholder mechanisms of the EITI.

However, CSO leaders were doubtful of the Philippine government’s commitment to champion peoples’ interests vis-a-vis the mining industry, citing the abundant privileges and incentives granted by the government to the sector despite its long history of questionable practices, including environmental degradation, tax and labor abuses.

“It is appalling that the Philippine government refuses to be transparent in policies and in its involvement in the extractive sector, ,” said Lidy Nacpil, Coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD. “The extractive industries have proven to be harmful and destructive to the environment and have significantly contributed to the climate crisis.”

Nacpil also said the sector is “a hotbed of illicit financial flows that result in foregone revenues and drain our economies of financial and other resources that should have instead been used for peoples’ needs.”

The Philippine government should prioritize peoples’ needs in the face of multiple crises and  put an end to tax and human rights abuses of corporations in the extractives sector, she said.

Dr. Benito Molino, Chairperson of Zambales Lingap Kalikasan (ZALIKA) denounced the latest move of the Department of Finance (DOF) to abscond a platform involving government, mining corporations, and civil society that requires its members to publish financial information according to a standard.

“Withdrawing from the EITI only further shows that this government is a willing puppet of extractive industries, especially mining,” Dr. Molino said. “As the Philippine government plays the role of eager servant to mining corporations, we foresee intensified extraction of natural resources and continuing impunity for corporations’ tax, labor, and other abuses. This will aggravate the destruction of areas for food production and will worsen our current food and environmental crises.”

Dr. Molino is a veteran of a long battle mounted by communities in Sta. Cruz Zambales, calling on the Philippine government to sanction mining corporations for the irreversible degradation of agricultural lands and fisheries in the area.

In 2017, four of these mining corporations were ordered to close as a result of the government's investigation of their violations of environmental laws. However, these orders were overturned in 2019.

The companies investigated by the Department of Environment and Natural Resources were BenguetCorp Nickel Mines Inc., Zambales Diversified Metals Corporation, LNL Archipelago Minerals Incorporated, Eramen Minerals Inc.

More recently, the lifting of Executive Order 79 imposing a moratorium on the approval of new licenses for mining corporations ^“guaranteed a new lease on life for mining corporations in Zambales,” Dr Molino said.

Dominguez’s pronouncement to champion transparency in the extractives sector offers nothing more than “false promises,” according to Fara Diva Gamalo, Coordinator of women’s organization Oriang in Eastern Visayas. “Public officials like Dominguez who have vested interests in protecting profits of mining corporations hold no moral high ground to institute policies strengthening accountability in the extractives sector,” Gamalo stated.

“For as long as the DOF is hostage to corporate interests in the extractives sector, the demands of local communities to exact accountability from mining corporations will remain unheeded,” Gamalo said.

At the forefront of the anti-mining struggles in Eastern Visayas, Gamalo has stood witness to the widespread impunity in human rights violations committed against leaders of local communities who demand simply for the government to protect their homes and livelihoods by prohibiting the destructive operation of mining corporations.

Meanwhile, in a message sent to Philippine-based CSOs, Financial Transparency Coalition (FTC) Executive Director Matti Kohonen said the Philippine government’s recent withdrawal from the EITI  is “a serious step back for transparency in the extractive sector, including financial transparency on ownership and taxes paid in the sector.”

The FTC is a global network of organizations working to help curb illicit financial flows with members in Europe, Africa, Latin America and the Caribbean, Asia, and North America.

Kohonen emphasized the need to  maintain  public registries of beneficial owners in extractive companies, and to regularly update and expand it to include fisheries and forestry.

A public beneficial ownership (BO) registry provides access to  information on companies’ beneficial owners, the individuals who ultimately own, control or benefit from the companies’ profits. CSO leaders said that such registries can be important tools in fighting tax abuse and corruption and can aid in  recovering foregone revenues from profits of mining corporations stored in offshore accounts.

The CSO leaders cited the 2021 State of Tax Justice Report saying untaxed wealth is but a fraction of the PhP 26 trillion lost to tax abuses globally of wealthy individuals and corporations. Aggressive and systematic tax avoidance practiced by extractive companies through transfer pricing and trade misinvoicing result in massive tax losses for the Philippines, they pointed out. 

They said government inaction to address these issues prompted the tax justice movement to mount protests at the DOF in November last year, demanding public investigations into the tax and labor abuses of mining corporations exposed in the Pandora Papers. The prevalence of profit-shifting and tax avoidance in the extractives sector, whose profits prosper amidst financial secrecy, also points to the weakness of global standards of financial transparency and lack of public access to beneficial ownership information. 

The longstanding demands by civil society for transparency and accountability are foregrounded by a history of unjust practices, including tax abuses and massive illicit financial flows (IFFs) in the Philippine extractives sector. These IFFs are jointly enabled by a domestic fiscal regime that encourages tax avoidance through decades-long tax incentives to mining corporations and a global tax architecture that continues to permit profit-shifting to low-tax jurisdictions. The Pandora Papers expose in 2021 implicated political and business elites across the world, including Philippines, in shady but systematic practices to hide wealth in offshore accounts to avoid paying taxes.

“It is imperative to transform global and domestic tax rules, to effectively curb IFFs and end the privileged status enjoyed by mining companies because of the   generous tax and other fiscal incentives granted by many governments in Asia, including the Philippines,” Nacpil said.  “Tax abuses by corporations and wealthy individuals and other types of IFFs  significantly drain tax revenues and public resources urgently needed to fund public services.”

-30-

WE ARE WORKERS TOO! Recognizing unpaid care workers through tax and fiscal justice

Download the PDF Version: WE ARE WORKERS TOO! Recognizing unpaid care workers through tax and fiscal justice

Governments’ reliance on indirect taxes to raise revenues adds more burden to low-income families, instead of economic relief. Value-added Tax (VAT), Goods and Services Tax (GST), and excise taxes on fuel are especially burdensome for women who generally earn less than men and who take on a bigger share of care and domestic work. Given this, plus the impacts of austerity measures prescribed by international financial institutions and decades-long privatization of essential services, women's struggles for survival and economic and gender justice have become even more acute. As women’s labor is exploited in homes and factories, the vast majority of women across the world continue to be time-poor, earn less than men, and have the least access to productive and other resources needed for social and economic resilience in times of crisis.

 

Millions of women across the world take on the bigger share of care work for families and households, a great deal of which are unpaid labor, and spend more of their income on basic household goods. The situation of women and other care workers who have no income of their own is often worse. Having to pay consumption tax for basic necessities worsens the already appalling situation of unpaid care workers, especially those who care for families that are barely surviving.

 

On top of the daily grind of taking care of the sick and elderly, cooking, cleaning, teaching children, and making do with deficient social services, the majority of women still have to find ways to earn to increase the income of their households. Surviving on a single income is almost impossible for many families and households. Many women have had to take on odd jobs (laundry, piece work, etc) or find informal work even in the formal sector.

 

While many women would prefer to seek formal employment, they are constrained by care duties at home and the lack of state provisions for child care and other physical and social infrastructures needed to enable them to work ‘outside the home’ without sacrificing care responsibilities. The 2017 ILO-Gallup report points out that, globally, a majority of women, including those who are not in the workforce, would prefer to work paid jobs. However, they were constrained by the challenges of work-family balance and lack of affordable care such as daycare centers for children.

 

Social norms, gender stereotypes, and macroeconomic policies that undervalue care work as “women’s work” or serve to confine women to unpaid domestic work and limit their social and economic mobility serve as barriers to women’s full enjoyment of their rights: right to education, decent work, right to access public spaces and be represented in decision-making, and many others. These discriminate against women, perpetuate gender pay gaps, exacerbate the “feminization” of poverty, and continue to disempower millions of women across the world.

---

 “Women’s work” by the numbers 

An International Labor Organization (ILO) report issued in June 2018 states that gender stereotypes and biases toward care work are still influential even as attitudes towards the gender division of paid and unpaid care work are changing. 

The ‘male breadwinner’ family model along with women’s traditional caring role remains deeply ingrained within societies. The report says, globally, women perform 76.2 percent of total hours of unpaid care work, more than three times as much as men.  In Asia and the Pacific, this rises to 80 percent with men performing the lowest share of unpaid care work of all regions (1 hour and 4 minutes). In Pakistan,  men devote a mere 28 minutes or 8.0 percent of their total working time. In India, men do only 31 minutes (7.9 percent) of unpaid care work. 

According to the ILO report, with data on two-thirds of the world’s working age population, 16.4 billion hours per day are spent in unpaid care work - the equivalent to 2 billion people working eight hours per day with no remuneration. Were such services to be valued on the basis of an hourly minimum wage, they would amount to 9 percent of global GDP or US$11 trillion (purchasing power parity in 2011).

Reference: Care Work And Care Jobs

https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_633166.pdf

---

The undervaluation of care and care work, is reflected in the gross imbalances and gaps in national budgets and lack of publicly funded care services, support systems for care workers, and physical and social infrastructures needed to reduce and redistribute care work. Care – caring for families, communities, and society as a whole – is an essential need and function of any society; it is not “just a woman’s responsibility,”  but the collective responsibility of society.

 

The Asian Peoples’ Movement on Debt and Development (APMDD) advances a comprehensive agenda for tax and gender justice that takes into account the multiple and intersecting layers of discrimination that women in Asia face and particularly notes the following¹:

• “The invisible and unpaid care work of women; the multiple responsibilities of housework; and economic activity for income -- Women assume a hugely disproportionate share of care labor or social reproduction. Taking care of the household, the children, the elderly, and the sick are still mainly seen as ‘women’s work’ – which are not valued (not seen as work) or undervalued (not seen as equally important to other work) and largely unpaid. The invisibility of women’s work is also an issue in economic production, where some of the work that women do are not recognized as part of the production process. It has been said that women perform more than two-thirds of the world’s work, produce almost half of the world’s food, yet only receive a small fraction of the income they would have otherwise earned, and only own one percent of property.

“Care labor and more specifically social reproductive work are not only largely unrecognized and uncompensated, but it also continues to be exploited under capitalism and made to feed into global trade and production chains in the current context of neoliberal globalization. It is also assumed that such care work rendered by women will take on the burdens resulting from the steady decline in public subsidies, or when essential social services are privatized.”

“We challenge such measures as the household and GDP, that do not take into account micro to macro inequalities in power and entitlements and fail to recognize the significant contributions of women’s unpaid work throughout human history.”

 

• “Women’s status and treatment within the family and within the context of marriage -- Despite playing a central role in caring for the family, women have secondary and/or subordinated status in the family with less power and privileges. Issues under this include women’s subjugation in the household decision-making process, the prevalence of domestic violence, prioritization of children’s and male partners’ health and nutrition over women’s, unjust household practices such as the dowry system, child/forced marriages, domestic violence, male-privileging inheritance and property rights, and discrimination over single and female-headed households, the problematic assumption that heads of households are always male.”

 

The road to equality for women requires a change of course, most especially to assert the cause and rights of the most vulnerable women which includes unpaid care workers.

 

Fiscal and tax systems should thus be transformed to ‘make taxes work for women,’ revalue care and render what is due to unpaid care workers; truly serve the interests of people and  the planet, and work for the building of just and equitable societies. Toward these ends, we advance the following calls and demands:

 

1. REDUCE UNJUST TAX BURDENS ON WOMEN; TAX THE RICH, NOT THE POOR

Regressive taxes like VAT and GST disproportionately burden women who make up the majority of the poor and who spend more on household necessities like food and utilities. The system of raising revenues by relying on indirect taxes only worsens the situation of unpaid care workers who do not earn any income to spend and who are part of or work with families who do not have much to spare as well. Unpaid care workers and women doing domestic work who have no regular income of their own but who have to care for families are hard pressed to manage with the additional VAT or GST on top of the prices of consumption goods.

 

But governments usually spare high-net-worth individuals and hard-to-tax groups, taxing regressively, while offering generous tax incentives to corporations. They focus on collecting sales and consumption taxes such as VAT, GST, and excise taxes that do not account for vast income disparities between the rich few and the poor majority. Meanwhile, tax avoidance and evasion by elite individuals and corporations remain unchecked and have led to the loss of potential tax revenues. (See article The Pandora Papers Exposé: Hoarding wealth amidst global hunger and uncertainties.)

 

VAT and GST are major sources of revenue in countries in Asia. But VAT, GST, and excise taxes on fuel weigh heavily on low-income households. In March, APMDD-India members agreed to campaign against the rise in fuel prices and LPG (Domestic Cooking Gas) prices. “Price increases in essential commodities impact women more than men as they are the ones who manage household expenses. A campaign to understand the issue is necessary," said one of the organizers of the consultation.

 

Unfortunately, some governments in the region are looking to increase regressive taxes further. Pakistan is likely to increase the sales tax rate to 18 percent from 17 percent in the federal budget 2022-2023. Sales taxes are, similar to VAT, regressive as a uniform amount is paid regardless of income.

 

In the Philippines, the Department of Finance is also proposing the expansion of the VAT  base and the repeal of exemptions to the incoming new government. The standard VAT rate of  12 percent of the gross selling price or gross value currently applies to most supplies of goods, properties, and services. Changes to the VAT regulations were made in 2021 under the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act. The law introduced a lower corporate tax and increased the excise taxes on fuel, automobiles, tobacco, and sugar-sweetened beverages with corresponding impacts on the prices of other goods and services consumed by Filipinos.

 

Indonesia already increased the VAT rate from 10 percent to 11 percent, effective 1 April 2022. Basic goods and services (rice, meat, public transport, etc.) will continue to be exempted.

 

Instead of increasing the tax burdens of ordinary people, governments should instead work toward progressive taxation that has the potential to earn much bigger tax revenues.

 

2. REDUCE AND REDISTRIBUTE UNPAID CARE WORK; INCREASE ALLOCATION OF TAX REVENUES FOR PUBLIC SERVICES

The dismal state of public services, revealed so poignantly during the height of the pandemic, is the outcome of decades-long privatization of essential services, including health care, underfunding of public services and other ‘belt-tightening’ measures prescribed by the IMF-WB on developing countries. Debt servicing and military spending also ate up chunks of national budgets in the region. Systematic tax avoidance by corporations and the elite, and other forms of illicit financial flows led to foregone revenues and drained economies of precious resources much needed for public services.

 

But massive resources are needed for governments to decisively address the collective plight of unpaid care workers and fulfill the commitment to reduce and redistribute care work.

 

Tax revenues should be allocated to priority and essential public services that fulfill basic needs and rights, and serve to reduce and redistribute care work, such as the following: 

*Primary health care facilities, including quality and gender-responsive reproductive health care;

*Day care facilities and other social infrastructures that truly address women and children’s needs; 

*Assisted living facilities for the elderly and persons with disability, and public spaces and buildings with assistive technology; 

*Safe, women-friendly and accessible public spaces, especially markets, footbridges roads, and WASH (water, sanitation, and hygiene) facilities, sources of clean and safe water; and  

*Lean, accessible and affordable, and safe energy for household needs.

3. RECOGNIZE, REPRESENT AND REWARD UNPAID CARE WORKERS

Barriers to care workers' social life, violations of their human rights, and their economic insecurity and poverty must be addressed as a matter of justice. Unpaid care workers, because they are not recognized as ‘workers’, do not enjoy basic workers’ rights including decent and fair wages, organization and joining of unions, economic initiative, social security, and retirement. Their workplaces – the ‘homes’ – are often deemed as ‘private spaces’ that are not supported or monitored for health and safety. They receive no assistance for sudden changes in work conditions, unlike other workers who have the right to assistance from loss of employment or receive some relief in emergencies like during the COVID-19 work slowdowns and closures.

 

Governments and societies must ensure their enjoyment of basic workers’ rights and other rights, including economic security, rest and leisure, equal access to public service, and participation in the cultural life of the community. Governments should ensure social protection, especially health and social security; ensure access to quality and gender-responsive continuing education and lifelong learning; and, reward unpaid care work through tax credits, VAT/ GST exemptions, and/or other financial instruments.

 

Tax systems should be rights-based and tax policies can be made to ensure that tax revenues are raised and spent in ways that promote human rights and gender equality. Governments must step up to adequately finance gender-responsive social services that promote women’s rights and reduce inequalities, including through gender-responsive budgeting.

 

4. STRENGTHEN WOMEN’S VOICE AND PARTICIPATION IN DECISION-MAKING, INCLUDING ON TAX AND FISCAL POLICIES AND OTHER SOCIAL AND ECONOMIC POLICIES THAT AFFECT WOMEN’S LIVES.

Women in unpaid care work and other fields and situations that hinder their economic autonomy and full exercise of their rights should be recognized and have the right to representation and participation in public life and decision-making. Spaces and resources must be allocated to support community-based women’s organizations and initiatives.

 

Governments have to work to realize their commitment to this agenda in the Beijing Declaration and Platform for Action, the most comprehensive agenda to date, on gender equality and women’s empowerment. The Platform for Action brought forward issues that impact women and girls and an understanding of women’s and girls’ rights and ushered in a new mindset that realizing the full potential of women and girls is a powerful and essential component of sustainable development. Among the issues identified to impact women and girls are poverty, violence against women, girls’ education, and equal participation of women in the labour market, especially in highly skilled jobs, STEM industries, and senior management. It is committed to promoting the balance of paid work and domestic responsibilities for women and men.

 

5. SYSTEM CHANGE: TOWARD JUST AND EQUITABLE SOCIETIES THAT VALUE CARE AND WORK FOR PEOPLE AND PLANET

Tax and gender justice require a radical rethinking of the value of care work and women in society. A transformative agenda for social and economic rebuilding that revalues care work and places people’s and the planet’s well-being at the center starts with a departure from the current capitalist and patriarchal system that feeds off the unpaid and underpaid labor of millions of women for the benefit of the elite few and corporate giants.

 

It is the sovereign right of people to reform their tax systems and institute policies away from the tax-related impositions of international financial institutions and toward people's needs and interests, and equality.

 

Unpaid care workers must be full participants in transforming the economy where care is valued as a public good and care workers can exercise their rights as workers and achieve economic autonomy and gender empowerment.

---

REFERENCES

​Addati, L., Cattaneo, U, Esquivel, V., Valarino, I. (2018) Care work and care jobs for the future of decent work (Report) International Labor Organization. 

https://www.ilo.org/global/publications/books/WCMS_633135/lang--en/index.htm

 

¹ JSAPMDD Women and Gender Framework and Perspectives Paper (2019, Working Paper of the APMDD Women and Gender Working Group. (unpublished). .

​​Progress of the world’s women 2015–2016: Transforming economies, realizing rights (2015) UN Women.
https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/Library/Publications/2015/POWW-2015-2016-en.pdf

 

Statistical Yearbook for Asia and the Pacific 2016 (2017) United Nations Economic and Social Commission for Asia and the Pacific.  

https://www.unescap.org/publications/statistical-yearbook-asia-and-pacific-2016

 

Sciortino, R. (2021) Informal Workers in Southeast Asia: Resourceless, yet Resourceful https://www.wiego.org/blog/informal-workers-southeast-asia-resourceless-yet-resourceful

Revenue Statistics in Asia and the Pacific 2021: Emerging Challenges for the Asia-Pacific Region in the COVID-19 (2021) Organisation for Economic Co-operation and Development (OECD)-Centre for Tax Policy and Administration (CTP) and the OECD Development Centre (DEV). 
https://www.oecd-ilibrary.org/docserver/ed374457-en.pdf?expires=1656148681&id=id&accname=guest&checksum=6CBB721E4CB1D31E16225E34B6E75816

---

SPARSE RESPONSES IN THE TIME OF PANDEMIC 

COVID-19 has underscored unpaid care and domestic work as the burdens of care workers were multiplied with households keeping indoors because of the shift to online classes and work from home arrangements, and further extended in households when household members are infected with COVID 19 and, at the height of infections, hard pressed to access health care because of the overwhelming number of patients.  

The COVID-19 pandemic worsened the situation of women doing unpaid care work. According to Amnesty International (AI), before the pandemic, women and girls were provided 12.5 billion hours of free care work every day globally. A sharp disparity is visible in South Asia. Referring to an Oxfam report, AI says “women in India spend 10 times more time on care work than men – both in urban and rural settings. In Bangladesh, women spend nearly thrice the time men do.  This arrangement of ‘all work and no pay’ while fuelling economic growth, has deprived women and girls of time and resources for education, skill development, or gainful employment. Unpaid and underpaid care work, a driver of inequality, has always left women with precarious jobs, insecure incomes, and no social safety – marginalized to the informal economy.” (READ Oxfam paper Time to Care). 

But government actions have not been responsive to the situation. The most common responses have only been food or food stamp distribution, cash transfers, and discounted utility bills, among others.

According to the 2021 ESCAP report,  “unpaid care and domestic work in Asia and the Pacific in the context of the COVID-19 pandemic reveals that of the various socioeconomic policy response measures instituted to date, less than 30 percent are care sensitive and only 12 percent are gender differentiated.”  

The ESCAP report further noted that of care-sensitive and gender differentiated responses,  there seems to be more social protection and cash transfers aimed at women but with time limitations.  There seems to be much less emphasis on the gender dimensions of care infrastructure and provision of care services. “The few gender-responsive and care-sensitive measures that have been put in place have been short-lived or are at risk of being rolled back or undone once the crisis eases,” the ESCAP noted.

---

DISCLAIMER:

This issue brief has been produced with co-funding from the European Union. Its contents are the sole responsibility of APMDD and do not necessarily reflect  the view of the European Union.

Curbing illicit financial flows and tax avoidance is particularly urgent in Asia, where peoples continue to suffer from budget cuts in essential social services even as they experience multiple crises. Making the rich pay their share is also particularly challenging in the region, as business interests are closely tied up with the interests of those in the government.

If summits of the super-rich like the OECD and the WEF provide any indication, tax transparency and accountability efforts are facing an uphill battle ahead. But the long history of peoples' struggles for justice and democratic movements in Asia are testament to the rich resources of hope that lie in our midst.

Read more: The Pandora Papers Exposé: Hoarding wealth amidst global hunger and uncertainties - Asian Peoples' Movement on Debt and Development (APMDD)

The Pandora Papers Exposé: Hoarding wealth amidst global hunger and uncertainties

While the vast majority of people across the world are under the grip of hunger and economic insecurity,  hundreds of politicians, business executives, royalties, celebrities, religious leaders, and even drug dealers were exposed to have been salting away their wealth in faraway offshore accounts. These individuals are counted among the super-rich, many of whom are set to meet with government leaders in Davos for the 52nd World Economic Forum this week.

 

Earlier this month, the International Consortium of Investigative Journalists (ICIJ) completed its releases of massive stores of data—2.9 terabyte of images, emails, and spreadsheets—of secret financial dealings of the global elite. Dubbed “the Pandora Papers,” the documents detailed transactions of money estimated to range from US$5.6 to US$32 trillion.

 

First published in October 2021, the Papers implicated individuals and companies from countries such as Cambodia, India, Malaysia, Pakistan, the Philippines, Qatar, South Korea, and the United Arab Emirates. Also included were individuals from Switzerland, Ukraine, the United Kingdom, as well as a former official of the International Monetary Fund and the Legionaries of Christ religious order. 

 

Previously, the ICIJ released the Panama Papers¹ in 2016, with 11.5 million confidential documents. A year later in 2017, it also leaked the Paradise Papers, which outed the likes of AIG (US-based leading global insurance company), Prince Charles, Queen Elizabeth II, the president of Colombia Juan Manuel Santos, and U.S. Secretary of Commerce Wilbur Ross. 

 

In the Pandora Papers, the Philippine Center for Investigative Journalism (PCIJ) and Rappler listed more than 940 individuals and companies with Philippine addresses².  Some of the more recognizable names from the business sector include the Aboitiz family, the Sy siblings, Helen Dee, Rolando Gapud, and Enrique Razon Jr. Government officials or individuals with links to government mentioned in the Papers include Transport Secretary Arthur Tugade, Dennis Uy, and Senator Sherwin Gatchalian and his family.

 

The Aboitiz family owns the Aboitiz Group, with interests in banking, real estate and infrastructure, and power generation—the Aboitiz Power Corp., a Philippine listed company that operates several coal-powered plants. 

The Sy siblings, owners of the SM Group conglomerate, are listed in Forbes 2021 as the richest Filipinos with a combined worth of $16.6 billion. In 2016, the group denied allegations that it had been practicing endo (contractualization). But In the same year, an inspection of the Department of Labor and Employment in SM stores in Metro Manila revealed that only 34,210 out of the company’s 67,248 employees had regular employment status. By keeping the bulk of its employees on a contractual basis, the company is able to avoid complying with labor laws and core international labor standards, which guarantee certain benefits for regular workers.³

Of Dictators and Dirty Energy:  Knotted Ties Unraveled

Helen Dee is the chairperson of Rizal Commercial Banking Corporation (RCBC). The bank was used by cyber criminals to steal $81 million from the Bangladesh Bank in February 2016.⁴ The bank has been financing investments in coal power plants, but in December 2020, it announced that it will no longer finance new coal power projects.

 

Rolando Gapud served as financial adviser for the family of the former dictator Ferdinand E. Marcos. The illegally-amassed wealth of Marcos has been a subject of numerous court litigations. As a respondent in several cases filed by the Philippine Commission on Good Governance (PCGG), Gapud later agreed to help identify some of the ill-gotten wealth,⁵ portions of which were eventually recovered. 

 

Although ousted by a popular revolt in 1986, the Philippine government is far from recovering fully the Marcos family’s stolen fortune, which is deftly hidden through a web of cronies, like Gapud. Imelda, the family’s flamboyant matriarch, was convicted by the Sandiganbayan,⁶ the country’s graft court, for seven counts of corruption in 2018 while serving as a lawmaker for her husband’s hometown.  Today, prospects of recovering the Marcoses’ ill-gotten wealth are bleak, as Ferdinand “Bongbong” Marcos Jr. is poised to take over the Philippine presidency after highly-contested elections⁷. 

 

Way back in 2013, the ICIJ reported that Imee Marcos, the eldest progeny of Marcos, is one of the beneficiaries of the Sintra Trust,⁸ created in June 2002 in the British Virgin Islands. Documents show that Imee was a financial advisor for the Sintra Trust, including a company in which the Sintra Trust was a beneficial shareholder, ComCentre Corporation. The documents also mentioned a bank account in the Sinagapore-based United Overseas Bank Limited. 

 

The Pandora Papers also mentioned Dennis Uy, a Davao-based businessman engaged in shipping and logistics, gas distribution, telecommunications and other industries. He is known to have donated P30 million to Rodrigo Duterte’s presidential campaign. He was later appointed presidential adviser for sports, and has been an honorary consul to Kazakhstan since 2011. 

 

Uy was embroiled in a business controversy in 2021 with the Makati Business Club, after his company, Udenna Corporation, acquired 90 percent of the Malampaya offshore gas field. Malampaya⁹ is supplying five power plants in Luzon, the country’s largest island. In the recently concluded Philippine elections, Uy’s logistics firm signed a Php 500 billion contract with the Commission on Elections to transport electoral ballots and vote counting machines, a significant number of which were defective on the day of the election¹⁰. As Uy is widely identified to be within the administration’s key elite circles, the granting of the bid to his logistic firm has been under fire.

 

Tugade and his children appear in the Trident Trust records as owners of Solart Holdings Limited, a British Virgin Island company. In the same Papers, members of the Gatchalian family are mentioned in nine offshore companies. 

 

Earlier in 2013, Manny Villar who is the second richest Filipino¹¹, was reported by the PCIJ to have been maintaining offshore accounts. Villar’s wife, Cynthia, chairs three Senate committees in the current 18th Congress—agrarian reform, environment, and agriculture and food. The Villars own vast tract of land under their real estate business¹², and it so happened that Cynthia’s committees have oversight in government land-related programs and developments.

 

Along with the Villars, Jinggoy Estrada who is Senator-elect in 2022 under the Ferdinand Marcos Jr. and Sara Duterte ticket was also reported to have offshore accounts. Jinggoy and his father, former president Joseph Estrada were both convicted and jailed for corruption raps. The older Estrada was later pardoned by another former president, Gloria Macapagal-Arroyo, who herself was convicted by a lower court in a plunder case but was cleared by the Supreme Court in July 2016, weeks after a close ally, Rodrigo Duterte, was elected president.

The Asian Connection

The inclusion of individuals from the Philippines in the Pandora Papers is hardly surprising, as elites from at least a dozen Asian countries have also been revealed to maintain offshore accounts. Two of the financial services providers mentioned in the Papers, Asiaciti Trust and Il Shin, are based in the financial centers of Singapore and Hong Kong, respectively.

 

The Indian Express reported¹³ more than 300 Indians with offshore accounts, including two former officials of the Indian Revenue Service, and a score of Bollywood celebrities, sports stars, business persons, and even individuals accused of fraud and other financial crimes. 

 

The Pandora Papers¹⁴ also revealed that financial backers, officials and family members close to Pakistan’s Prime Minister Imran Khan to be owning concealed companies and trusts holdings, with several military leaders being involved. In Sri Lanka, former deputy minister Nirupama Rajapaksa¹⁵ and her husband used shell companies and trusts to hide some $18 million in assets, while Nepal’s lone billionaire, Binod Chaudhary, a politician and retail and manufacturing magnate, owns shares in three offshore shell companies. 

 

The Center for Investigative Journalism (CIJ) Nepal¹⁶ reported offshore dealings of the Malaysian billionaire founder of Top Glove, a giant rubber glove maker which hugely profited from the COVID-19 pandemic. The company was accused of employee abuses, including forced labor, with workers mostly coming from low-income countries. 

 

In Malaysia, the Malaysiakini¹⁷ investigated the role of Singapore in the global offshore financial system. They reported that while the island city-state does not have attractive tax and asset protection comparable to other offshore financial centers, it offers specialized financial services, such as creating and managing shell companies and trusts in overseas jurisdictions.

 

In Thailand, the Isra News¹⁸ reported that Chitpas Kridakorn, a parliament member and heiress of the Singha beer empire, was a potential beneficiary of a trust that owned luxury properties in the United Kingdom, based on a 2017 transactions, although it was not ascertained whether the transfer was finalized.  

 

The Tempo magazine on the other hand, reported that two top Indonesian officials are linked ¹⁹ to several offshore companies. Coordinating Minister for the Economy Airlangga Hartarto reportedly owned two companies registered in the British Virgin Islands, but he denied any connections. The report also said that Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan was a director of a Panama-based oil company. 

 

One glaring reality in the Pandora Papers involving individuals in Asia —many of those implicated have close links to government officials, if not former or current government officials themselves. Business and governance are intimately linked. This makes future actions and lobby efforts for transparency and accountability more difficult.

“The legality is the true scandal”

While some of the transactions can be legitimate investments, the intention to hide it from the country of origin by account owners is clear and could be inferred as an attempt to avoid tax obligations, conceal ill-gotten wealth, or worst, launder money acquired from criminal activities.  

 

In October last year, activist and science-fiction author Cory Doctorow²⁰ tweeted that offshore dealings of the super elite’s being legal is the true scandal. “Each of these arrangements represents a risible fiction: a shell company is a business, a business is a person, that person resides in a file-drawer in the desk of a bank official on some distant treasure island,”he said. 

 

Doctorow was commenting on what the Pandora Papers revealed—the intensive use of shell companies which are mostly inactive, maintained for future and various financial arrangements. These shell companies are registered in an OFC (Offshore Financial Center), a territory or country that provides foreign companies with business and financial services.  Some of the well-known OFCs include the British Virgin Islands, Bahamas, Bermuda, Cayman Islands, the Isle of Man, Seychelles, Hong Kong, and even Switzerland. Some of the documents obtained in the Papers were also in trusts set up in the US, such as South Dakota and Florida.

 

The ‘offshore’ system is nothing new—it originated in the 1960s, with the creation of the Eurobond²¹: a financial investment instrument allowing owners to move their wealth covertly across jurisdictions, while evading taxes altogether, or at the very least, avoid payment of higher rates of interest. 

 

In the 1960s, the European middle-class had difficulty finding low-risk places to put their savings and earn safe returns. Regulation Q, formulated in 1933 under the US Glass-Steagall Act,²² discouraged Europeans from putting up deposit accounts because the law limits interest rates paid on deposits in checking accounts. Added to this, the US’s Interest Equalization Tax of 1963, which carried 15 percent tax on the price of a bond purchased, decreased the capital account outflows, increasing investment in the US. Eventually, it choked the flow of dollars into Europe; inhibiting companies from funding their projects. The Eurobond²³ was the workaround, and it served later as the prototype for other money market funds. 

 

Today, it is the super-rich that is handsomely benefitting from the outcome of the Eurobond and its underlying needs that birthed the offshore system. The financial market in which offshore banking is just one limb, has now mutated into a beast, siphoning off every wealth created anywhere in the planet.   

 

Considering that a huge percentage of this stashed-away wealth were generated at the expense of the working people through slave-like conditions and unlivable wages, not to mention the rapacious exploitation of the environment which threatens the global ecological balance, offshore banking takes on a whole new meaning.

 

A study by Daniel Reck²⁴, an assistant professor from the London School of Economics and Politics published in 2021, states that tax evasion schemes by the super-rich are becoming sophisticated” and that even expert auditors are now having difficulty locating offshore accounts, with the top one percent richest benefitting.  

 

One problem is in the privacy and protection these OFCs provide—privacy rights which shield individuals from declaring their assets and accounts.  The grey area lies in this point of nondisclosure, when it becomes next to impossible to differentiate tax minimization from evasion or outright fraud.

 

Reck and his colleagues at Carnegie Mellon University and the University of California said that the top one percent of American earners fail to report about 21 percent of their incomes to the Internal Revenue Service (IRS), significantly more than was previously known. “These super–high-income taxpayers, who have so much to gain from successfully evading their taxes, are much more sophisticated at evasion than the other 99 per cent of earners,” the researchers said²⁵. 

 

The 2021 report by the United Nations High-Level Panel on Financial Accountability, Transparency and Integrity Panel (UN FACTI),²⁶ has identified that large portions of revenue that could be used by governments to benefit their own peoples are being lost in an elaborate scheme of tax avoidance and evasion. The UN FACTI Panel report stressed the importance of a global mechanism for public registries of beneficial ownership to curb these abusive practices.

With legal loopholes that can be exploited to actually evade taxes, the legality of offshore banking is no longer a non exitus. Or perhaps, that tax avoidance through storing wealth in offshore accounts is even legal in the first place is the main issue, and nothing but short of scandlous.

Initial impacts of the Pandora expose

In 2016, the Panama Papers ignited protests that led to authorities launching hundreds of tax probes and criminal investigations. Iceland’s prime minister eventually resigned, and a Ukrainian politician called for the impeachment of their president. Last year, a Bollywood actress was questioned for six hours by Indian authorities on her inclusion in the Papers. 

 

In Malta, Keith Schembri, former Prime Minister Joseph Muscat’s chief of staff, was charged with money laundering and fraud, while in Denmark, the country’s tax minister cited the Panama Papers to justify hiring hundreds of new employees to bolster the fight against tax fraud.

 

In the U.S the Panama Papers was instrumental in pushing for the enactment of the Stop Tax Haven Abuse Act and the For the People Act. 

 

The Philippines, however, has yet to catch up with the growing clamor to investigate offshore banking and tax avoidance. The exposé on the offshore account of Jinggoy Estrada in 2013 for instance, did not result in tax fraud investigations, despite his being convicted with corruption. The government is still struggling to enforce tax laws in its own jurisdiction particularly against the wealthy individuals and multinational corporations. Taxes from the ordinary working people however are automatically deducted from their paychecks, on top of burdens from heavily taxed products and services that they regularly consume. 

 

According to tax expert Mon Abrea, corruption at the Bureau of Internal Revenues (BIR) is embedded in the system. A former BIR examiner and a prominent advocate for genuine tax reform in the country, Abrea said in 2018 that whatever the TRAIN law was can hope to collect will be wasted due to corruption. He cited a proposed bill on the creation of national revenue authority, where the current BIR examiners will be forced to retire, and only those who pass new stringent mechanism will be rehired²⁷.  

 

Currently, the BIR is unable to address issues of tax non-payment by big business and its relation to government corruption.

 

In 1993, the BIR filed a tax case against Lucio Tan, one of the country’s tycoons, for not paying P7.68 billion in ad valorem, income and value-added taxes in 1992. The BIR later filed two more cases, accusing Tan of tax non-payment amounting to P9.51 billion in 1990 and P8 billion in 1991. Tan was able to halt the proceeding proper for 12 years. In 2005, the cases finally held their first hearing, with the tax claims ballooning to P25 billion. But a year later in 2006, the Marikina Metropolitan Trial Court dismissed the tax case for lack of evidence.

 

In 2017, President Duterte announced that Lucio Tan owes the government at least P30 billion in taxes. A year after in 2018, he suddenly “cleared” the tycoon of past tax liabilities, saying he would “forever shut up” on the subject, after Tan as CEO of Philippine Airlines (PAL) offered additional plane to fly home repatriated OFWs from Kuwait, and after PAL’s payment of P6 billion in taxes in 2017.  

 

But the best piece of evidence that tax law enforcement in the Philippines for the rich and powerful is different for the ordinary working Filipinos is the recent Commission on Election (COMELEC) decision to junk the disqualification case against presidential candidate Ferdinand “Bongbong” Marcos Jr. stemming from an earlier court indictment for estate tax non-payment.  A portion of the COMELEC decision penned by the now controversial Commissioner Aimee Ferolino, read: “The failure to file tax returns is not inherently wrong in the absence of a law punishing it.”  

In the case of the Lopez-owned media giant ABS-CBN’s franchise non-renewal,²⁸ tax non-payment has taken a different role—political weapon against a private company seen as non-ally of the sitting government. The controversy has rendered 11,000 ABS-CBN workers jobless.

Layered benefits for the already rich

Offshore financial dealings have already demonstrated how the super-rich can safely tuck away their wealth from public scrutiny, dodge taxes and take away potential public revenues. It has been noted also that those who maintain offshore accounts are either super-rich individuals or government officials. With that in mind, it is now easy to imagine that any attempt to regulate the wealth creation and preservation of the rich can be swiftly dealt with by those who benefit from offshore banking in the government. 

 

Philippine Finance Secretary Carlos Dominguez III for instance asserted that instituting a wealth tax carries the risk of capital flight.²⁹  He did not say however that the super-rich do not need any reason to move their money as they see fit. This is in spite of the reality that in times of economic crises, the super-rich are the same group that benefit more from government interventions and incentives.

 

On March 26, 2021, the Philippine Congress enacted Republic Act (RA) 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE), formerly known as TRABAHO bill, the second part of the TRAIN Law. Hailed as a COVID  fiscal relief to domestic and foreign corporations doing business in the Philippines, it amended several provisions in the old Tax Code. It reduced corporate income tax from 30 percent to the current 25 percent, retroactive to July 1, 2020, and will be reduced further by 1 percent annually in the next six years, up to 20 percent by 2027. 

 

Earlier in June 2020, economists from the country’s top universities issued a position paper opposing its passage. Former UP School of Economics (UPSE) Deans Raul V. Fabella and Ramon L. Clarete and Ateneo School of Government Dean Ronald Mendoza explained that the revenue loss the government will incur is far too great in a time when the need to increase the tax effort is critically important.

 

According to Fabella, the looming U-shaped recovery will diminish the possible gains of TRAIN law, whether the government will retain the 30 percent or enforce the new 25 percent corporate tax. Clarete for his part noted that during the Asian Financial Crisis and the succeeding Global Economic Crisis in 2007-2009, the country was forced to cut on corporate income taxes to encourage more firms to pay their taxes, but the revenues only improved after the economy finally recovered. He also said that it is only at the end of the Covid-19 crisis that investors can regain the confidence to invest³⁰.

 

While Finance chief Dominguez claimed that CREATE will generate P42 billion in extra capital once the bill is enacted, and P625 billion over the next five years, economist JC Punongbayan said that it will not jumpstart the ailing economy.

 

According to Punongbayan the government should instead put money directly in the hands of workers through cash transfers, wage subsidies, or zero-interest loans. He also said that CREATE will favor big businesses, not the MSMEs that employ about 63 percent of the Filipino workforce and were hardest hit by the pandemic. The difference in tax savings, he said, would be in the billions for big business, but only a few thousands for the small business owners. 

 

The assertions of the economists mentioned above in 2020 that CREATE will not result in a rebounding of investments proved to be correct. In November 2021,³¹ the Philippine Economic Zone Authority reported a 25 percent drop in investment pledges. In February 2022, the drop increased to 27 percent.

 

Labor groups for their part have called for vigorous government spending, particularly continued support for household’s expenses through cash transfers. The labor sector also proposed economic activities which will generate jobs and income for workers, such as the provision of public transport (through service contracting), provision of infrastructure useful in containing the pandemic and contact tracing.  Aside from health, the government could have also augmented its spending in other sectors. Finally, the groups have proposed government stimulus in economic activities, by subsidizing costs of production and wages. 

 

With not enough money to finance its needed economic interventions, the government resorted to borrowing. By the end of 2021, the country’s debt stood at P11.7 trillion, almost P2 trillion or 19.7 percent more than the P9.8 trillion recorded ending 2020. Domestic debt reached P8.17 trillion, 22 percent higher than 2020, while external debt grew 14.8 percent to P3.56 trillion. According to the Bureau of Treasury, the debt is “still within the accepted sustainable threshold as the economy continues to recover from the effects of the pandemic.”

 

But president Duterte and his economic managers allocated the borrowed money into something else. The 2021 budget indicated huge allocation to infrastructure projects with unestablished social benefits, instead of vaccines and healthcare needs. Whatever limited resources are allocated for public health intervention was compromised by the anomalous Pharmally transactions³². The government has also poured some P19.5 billion to its anti-insurgency program.  Allocation for the poor, workers, and small businesses took the backseat.

 

Where lies our hope?

In Greek Mythology, Pandora inadvertently opened a box left to the care of her husband. Expecting to contain precious gifts, she quickly realized to her dismay that it contained illness, hardship, trouble and pain for humanity. In the end, however, she found out that there remained at the bottom of the box something that can compensate for or even undo the plagues: hope.   

 

The Pandora Papers has exposed not only the growing divide between the haves and have nots. It also revealed that the world has become no more than a playground for the monied class.

 

A core function of any democratic society is the effective capacity of the government to tax excessive wealth to reduce inequality and disparities of political influence. 

 

These revenues that can be recovered from recovering and taxing offshore wealth can be mobilized for infrastructure, hospitals, schools, and other essential public services necessary for  inclusive and sustainable development. 

 

Curbing illicit financial flows and tax avoidance is particularly urgent in Asia, where peoples continue to suffer from budget cuts in essential social services even as they experience multiple crises.. Making the rich pay their share is also particularly challenging in the region, as business interests are closely tied up with the interests of those in the government. If summits of the super-rich like the OECD and the WEF provide any indication, tax transparency and accountability efforts are facing an uphill battle ahead. But the long history of peoples’ struggles for justice and democratic movements in Asia are testament to the rich resources of hope that lie in our midst.

---

¹https://www.icij.org/investigations/panama-papers/

²https://www.rappler.com/newsbreak/investigative/filipinos-tycoons-government-officials-mentioned-pandora-papers-icij/

³Endo is a contraction of ‘end-of-term’ referring to companies’ practice of hiring workers for  contractual work, of   usually five months and sometimes, even less. It falls short of the required   six months continuous work which under the Philippine labor law can be a basis for regular employment status. The practice effectively prevents workers from joining unions, denying them better benefits through collective bargaining. It also prevents workers from charting a better life as planning is difficult in an employment that ends in five months, and subjects them to an almost permanent state of insecurity. Ending endo was one of the unfulfilled political promises of the current president, Rodrigo Duterte. See: https://www.rappler.com/newsbreak/iq/201468-duterte-endo-contractualization-promise-2016-to-2018/

⁴https://www.reuters.com/article/cyber-heist-philippines-idUSL3N20Z1FL

⁵ https://www.foi.gov.ph/requests/aglzfmVmb2ktcGhyHgsSB0NvbnRlbnQiEVBDR0ctMzM0MjAyNzM2MTY1DA

⁶ https://www.pna.gov.ph/articles/1053757

⁷ https://newsinfo.inquirer.net/1600309/intl-observers-may-9-ph-vote-falls-short-of-free-fair-election-standards

⁸ https://www.icij.org/investigations/offshore/ferdinand-marcos-daughter-tied-offshore-trust-caribbean/

⁹ https://malampaya.com/about/

¹⁰ https://ph.news.yahoo.com/elections-2022-almost-2000-vc-ms-reported-malfunctioning-on-election-day-080109477.html

¹¹ https://www.forbes.com/philippines-billionaires/#25aa38237776

¹² https://www.bloomberg.com/profile/person/1551460

¹³ https://indianexpress.com/article/express-exclusive/pandora-papers-exclusive-how-elite-indians-ringfence-wealth-7550012/

¹⁴ https://www.icij.org/investigations/pandora-papers/pakistan-imran-khan-prime-minister-allies-offshore/

¹⁵ https://www.icij.org/investigations/pandora-papers/sri-lanka-rajapaksa-family-offshore-wealth-power/

¹⁶ https://cijnepal.org.np/binod-chaudhary-pandorapapers/

¹⁷ https://www.malaysiakini.com/news/593919

¹⁸ https://www.isranews.org/article/isranews/103123-investigative00-2-68.html  

¹⁹ https://en.tempo.co/read/1513567/airlangga-luhut-responds-to-pandora-papers-report

²⁰ An advocate for liberalising copyright laws, co-founded the free software P2P company Opencola in 1999. Themes of his work include digital rights management, file sharing, and post-scarcity economics.

²¹ A debt instrument that's denominated in a currency other than the home currency of the country or market in which it is issued

²² Repealed in 1999

²³ https://www.lexology.com/library/detail.aspx?g=3d8c169d-4392-4adb-b6cd-44d034ffc99e

²⁴ https://www.lse.ac.uk/research/research-for-the-world/economics/sophisticated-tax-evasion-by-the-super-rich

²⁵ https://www.lse.ac.uk/research/research-for-the-world/economics/sophisticated-tax-evasion-by-the-super-rich

²⁶ https://www.factipanel.org/

²⁷ https://www.rappler.com/business/209399-corruption-bureau-internal-revenue-abolish-mon-abrea/

²⁸ https://cpj.org/2020/07/philippine-congress-denies-abs-cbn-news-broadcasters-franchise-renewal/

²⁹ https://www.dof.gov.ph/dof-says-super-rich-tax-bill-to-lead-to-capital-flight-tax-avoidance/

³⁰ https://businessmirror.com.ph/2020/06/03/create-bills-ok-now-bad-timing-experts/

³¹ https://www.philstar.com/business/2021/11/09/2139904/investments-ecozones-decline-25-9-months

³² http://legacy.senate.gov.ph/press_release/2021/1013_gordon1.asp